[Federal Register Volume 86, Number 16 (Wednesday, January 27, 2021)]
[Notices]
[Pages 7321-7324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01727]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90956; File No. SR-NYSEAMER-2021-03]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the NYSE American Options Fee Schedule

January 21, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 13, 2021, NYSE American LLC (``NYSE American'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE American Options Fee 
Schedule (``Fee Schedule'') regarding the credit for certain American 
Customer Engagement (``ACE'') Program Simple transactions. The Exchange 
proposes to implement the fee change effective January 13, 2021. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify the Fee Schedule regarding 
a certain credit available to ACE Program participants who also have an 
affiliated or appointed Market Maker that participates in the 
Prepayment Program.\4\ The Exchange proposes to implement the rule 
change on January 13, 2021.
---------------------------------------------------------------------------

    \4\ See Fee Schedule, Section I.D., Prepayment Program.
---------------------------------------------------------------------------

    Section I.E. of the Fee Schedule sets forth the per contract 
credits applicable to Simple and Complex executions for participants in 
the ACE Program. Currently, the Exchange offers a range of credits to 
ACE Program participants for each electronic Customer contract, 
including certain credits available to participants with affiliated or 
appointed Market Makers that prepay their Market Maker fees. The 
credits are tiered based on increasing levels of Customer

[[Page 7322]]

Electronic Average Daily Volume (``ADV'') or, for Tiers 3 through 5, 
Total Electronic ADV, of which 20% of the qualifying volume for the 
Tier must be Customer volume.
    The Exchange proposes to modify the Fee Schedule to amend the per 
contract credit applicable to Tier 5 Simple executions by Order Flow 
Providers that have an affiliated or appointed Market Maker that 
prepays its Market Maker Fees (the ``Credit''). Specifically, the 
Exchange proposes to modify the amount of the Credit from ($0.24) per 
contract to ($0.23) per contract.\5\ Because the volume of Electronic 
executions has increased across the industry, the Exchange believes the 
proposed change would still encourage more participants to try to 
achieve the Credit by directing more order flow to the Exchange.
---------------------------------------------------------------------------

    \5\ See proposed Fee Schedule, Section I.E., American Customer 
Engagement (``ACE'') Program Table.
---------------------------------------------------------------------------

    The Exchange's fees are constrained by intermarket competition, as 
ATP Holders may direct their order flow to any of the 16 options 
exchanges, including another exchange with similar incentive 
programs.\6\ Thus, ATP Holders have a choice of where they direct their 
order flow, including Electronic volume.
---------------------------------------------------------------------------

    \6\ See, e.g., Cboe Exchange Inc. (``Cboe''), Fee Schedule, 
Volume Incentive Program, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing per contract 
credits based on volume tiers in Simple and Complex executions).
---------------------------------------------------------------------------

    To the extent that the proposed modification to the Credit 
continues to encourage Customer order flow and Market Makers to prepay 
their fees, all market participants stand to benefit from both 
increased Customer order flow to achieve the Credit and continued 
Market Maker participation to take advantage of having pre-paid their 
fees. The Exchange believes all market participants stand to benefit 
from increased order flow, which promotes market depth, facilitates 
tighter spreads and enhances price discovery.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\8\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposed Rule Change Is Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
---------------------------------------------------------------------------

    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% of the market 
share of executed volume of multiply-listed equity and ETF options 
trades.\10\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in November 2020, the Exchange had less 
than 10% market share of executed volume of multiply-listed equity and 
ETF options trades.\11\
---------------------------------------------------------------------------

    \10\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \11\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in multiply-listed equity and ETF 
options increased from 8.06% for the month of November 2019 to 9.09% 
for the month of November 2020.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees and credits can have a direct effect on 
the ability of an exchange to compete for order flow.
    The proposed rule change is designed to continue to incent ATP 
Holders to direct liquidity to the Exchange in Electronic executions, 
similar to other exchange programs with competitive pricing programs, 
thereby promoting market depth, price discovery and improvement and 
enhancing order execution opportunities for market participants. In 
particular, the Exchange believes it is reasonable to adjust the Credit 
downward, as the Credit would remain consistent with those offered by a 
competing options exchange for electronic participants.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., supra note 6 (regarding Cboe's VIP Program).
---------------------------------------------------------------------------

    The proposed change is reasonably designed to continue to encourage 
ATP Holders to participate in both the ACE Program and in the Market 
Maker Prepayment Program and to achieve ACE Tier 5 (the highest ACE 
Tier) to qualify for the Credit. The Exchange believes that otherwise 
maintaining the qualification bases to achieve the ACE Tier credits 
should also continue to encourage greater use of the Exchange by all 
ATP Holders, which may lead to greater opportunities to trade--and for 
price improvement--for all participants. Because the ACE Program is 
based on the amount of Customer business transacted on the Exchange, 
the Exchange believes the proposed change to decrease the Credit would 
still continue to incent providers of Customer order flow to direct 
that order flow to the Exchange. In addition, ATP Holders' affiliated 
or appointed Market Makers will also continue to be incented to compete 
to make markets in a manner that enables the Exchange to improve its 
overall competitiveness and strengthen its market quality for all 
market participants.
    Further, the Exchange believes this proposed change would continue 
to attract more volume and liquidity to the Exchange generally, and 
more Customer volume specifically, and would therefore benefit all 
market participants (including those that do not participate in the ACE 
Program) through increased opportunities to trade at potentially 
improved prices and enhanced opportunities for price discovery. In 
addition, the proposed change would continue to encourage ATP Holders 
to have affiliated or appointed Market Makers prepay their Market Maker 
fees, which in turn encourages the Market Makers to conduct business 
and to make competitive markets on the Exchange, to the benefit of all 
markets participants.
    Finally, to the extent the proposed change encourages greater 
volume and liquidity, the Exchange believes the proposed change would 
continue to improve the Exchange's overall competitiveness and 
strengthen its market quality for all market participants. In the 
backdrop of the competitive environment in which the

[[Page 7323]]

Exchange operates, the proposed rule change is a reasonable attempt by 
the Exchange to maintain its market share relative to its competitors.
The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposal is based on the amount 
and type of business transacted on the Exchange and ATP Holders can opt 
to avail themselves of the incentives available through the ACE and 
Market Maker Prepayment Programs or not. The proposal is also designed 
to encourage ATP Holders and their affiliated or appointed parties to 
aggregate their executions at the Exchange as a primary execution 
venue. Moreover, to the extent that the proposed change continues to 
attract more Market Maker prepay activity to the Exchange, this 
increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, continue to attract 
more order flow to the Exchange, thereby improving market-wide quality 
and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed modification would be available to 
all similarly-situated market participants on an equal and non-
discriminatory basis.
    The proposal is based on the amount and type of business transacted 
on the Exchange and ATP Holders are not obligated to try to qualify for 
the credits available to ACE or Market Maker Prepayment Program 
participants. Rather, the Exchange's proposed modification to the 
Credit is designed to continue to encourage greater use of the Market 
Maker Prepayment Program, which may lead to greater opportunities to 
trade--and for price improvement--for all participants, as well as 
continue to encourage participants to utilize the Exchange as a primary 
trading venue (if they have not done so previously) or increase 
Electronic volume sent to the Exchange. To the extent that the proposed 
change continues to attract more executions to the Exchange, this 
increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would continue to improve market quality for all 
market participants on the Exchange and, as a consequence, attract more 
order flow to the Exchange thereby improving market-wide quality and 
price discovery. The resulting volume and liquidity would continue to 
provide more trading opportunities and tighter spreads to all market 
participants and thus would promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system and, in general, to protect 
investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would continue to encourage the submission of 
additional liquidity to a public exchange, thereby promoting market 
depth, price discovery and transparency and enhancing order execution 
opportunities for all market participants. As a result, the Exchange 
believes that the proposed changes further the Commission's goal in 
adopting Regulation NMS of fostering integrated competition among 
orders, which promotes ``more efficient pricing of individual stocks 
for all types of orders, large and small.'' \13\
---------------------------------------------------------------------------

    \13\ See Reg NMS Adopting Release, supra note 9, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to 
continue to attract order flow to the Exchange by offering competitive 
rates and credits via the ACE Program, based on increased volumes on 
the Exchange, which would enhance the quality of quoting and may 
increase the volumes of contracts traded on the Exchange. To the extent 
that this purpose is achieved, all of the Exchange's market 
participants should benefit from the continued market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the increase in order flow directed to the Exchange will benefit 
all market participants and improve competition on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing option exchanges if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single 
exchange currently has more than 16% of the market share of executed 
volume of multiply-listed equity and ETF options trades.\14\ Therefore, 
no exchange currently possesses significant pricing power in the 
execution of multiply-listed equity and ETF options order flow. More 
specifically, in November 2020, the Exchange had less than 10% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\15\
---------------------------------------------------------------------------

    \14\ See supra note 10.
    \15\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, supra 
note 11, the Exchange's market share in multiply-listed equity and 
ETF options increased from 8.06% for the month of November 2019 to 
9.09% for the month of November 2020.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change reflects this 
competitive environment because, even though the amount of the Credit 
is decreased, ATP Holders should still be incentivized to direct 
trading interest to the Exchange, to provide liquidity and to attract 
order flow. To the extent that this purpose is achieved, all the 
Exchange's market participants should benefit from the improved market 
quality and increased opportunities for price improvement.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
another exchange that currently offers similar pricing incentives,\16\ 
by encouraging additional orders to be sent to the Exchange for 
execution.
---------------------------------------------------------------------------

    \16\ See, e.g., supra note 6 (regarding Cboe's VIP Program).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \17\ of the Act and

[[Page 7324]]

subparagraph (f)(2) of Rule 19b-4 \18\ thereunder, because it 
establishes a due, fee, or other charge imposed by the Exchange.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAMER-2021-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAMER-2021-03. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEAMER-2021-03, and should be 
submitted on or before February 17, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01727 Filed 1-26-21; 8:45 am]
BILLING CODE 8011-01-P


